MASTER 
NEGATIVE 

NO.  95-82445 


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Author: 


Bloomfield  &  Bloomfield 


Title: 


Methods  of  compensation 
for  department  store... 

Place: 

Boston 

Date: 

[1921] 


.■.I J    '    mr—^rfmm 


MASTER   NEGATIVE   » 


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Bloomfield  &  Bloomfleld. 

Methods  of  compensation  for  department 
store  employees;  a  survey  by  Industrial  re- 
lations, Bloomfield 's  labor  digest.  Boston, 

C1921. 

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SPECIAL  ECONOMIC  SUPPLEMENT 


Methods  of  Compensation 
Department  Store  Employees 


t 


A  Survey  by  Industrial  Relations 
Bloomfield's  Labor  Digest 


\ 


Copyright  1921 

BLOOMFIELD  &  BLOOMFIELD 

Publishers  of  Industrial  Relations  —  Bloomfield*8  Labor  Digest 

Consultants  in  Personnel  and  Industrial  Relations  Problems 

6  BEACON  STREET,  BOSTON 


'4' 


£ 


in 
in 

03 


INDEX 


What  This  Survey  Shows 


Contact  with  Customer 


The  Wage  as  an  Incentive 
Temporary  Payments 


Commission  and  Bonus 


Commission  Systems 
Examples 


Seasonal  Commissions 


Measured  Individual  Bonus 


The  Bonus  System--Pro  and  Con 
Measured  Group  Bonus 

Profit  Sharing 
Stock  Participation 
Bonus  Payments 


(2) 

FINANCIAL  INCENTIVES  iFOR  DEPARTMENT  STORES  EMPLOYEES 
A  Survey  by  Industrial  Relations:  Bloomf ield' s  Labor  Digest 


Redoubled  efforts  by  retail  stores  to  find  a  system  of  compensation  which 
provides  incentive  to  the  individual  employee  and  greater  sense  of  responsibility 
for  the  growth  and  success  of  the  business  among  employees  as  a  group  of  co-workers, 
are  indicated  by  the  increasing  number  of  department  stores  which  have  established 
bonus  and  commission  systems,  or  are  changing  and  perfecting  methods  of  long  stand- 
ing. 

WHAT  THIS  SURVEY  SHOWS 

A  survey  by  Industrial  Relations  conducted  during  the  past  year  among  several 
hundred  retail  stores,  large  and  small,  in  all  sections  of  the  country,  shows  that 
nine-tenths  of  these  stores  have  established  a  bonus  or  commission  system  that 
seems  to  be  more  or  less  satisfactory,  are  experimenting  with  a  system  of  com- 
pensation which  they  hope  will  have  better  results  than  previous  flat-wage  methods, 
or  desire  to  adopt  some  other  system  if  a  better  plan  can  be  found. 


CONTACT  WITH  THE  CUSTOMER 

The  retail  store  is  probably  more  dependent  upon  the  spirit  of  the  individual 
employee  than  any  other  branch  of  business  or  industry.   This  is  particularly  true 
in  all  selling  operations,  which  involve  a  contact  between  customer  and  employee 
in  which  the  intelligence  and  interest  of  the  employee  is  an  important,  and  fre- 
quently the  important,  factor.   The  principal  object  of  a  large  majority  of  the 
stores  in  establishing  commission  and  bonus  systems  has  been  to  make  this  contact 
between  employee  and  customer  more  effective  by  making  such  positions  attractive 
for  workers  of  ability,  and  by  providing  incentive  for  greater  effort  in  each 
transaction.   Prom  one-third  to  one-half  of  the  employees  of  a  store  have  contact 
with  the  buying  public  with  a  direct  effect  upon  sales,  and  the  efficiency  of  many 
of  the  employees  who  do  not  meet  the  customer  has  an  influence  upon  sales  that  is 
by  no  means  remote. 


Additional  compensation  for  all  employees,  as  a  reward  for  better  team-play 
and  organization  spirit,  has  been  provided  by  many  stores.   This  type  of  extra 
payment  is  sometimes  a  substitute  for  a  commission  or  bonus  system,  more  often 
used  in  addition  to  such  a  system. 

Profit  sharing,  through  stock  distribution  among  employees,  has  been  adopted 
by  several  stores,  but  they  comprise  a  small  proportion  only. 

THE  WAGE  AS  AN  INCENTIVE 


It  is  also  noteworthy  that  some  stores  find  an  established  wage,  subject  to 
frequent  adjustment  to  conform  to  the  record  of  the  individual  employee,  meets 


(3) 

successfully  the  prolDlera  of  providing  incentive.  Some  stores,  having  abandoned 
commission  and  "bonus  systems,  revert  to  such  plans  again  after  providing  better 
supervision  and  records. 

WHY  SOME  PAYMENTS  ARE  TEMPORARY 

Study  of  methods  of  compensation  in  addition  to  an  established  wage  during 
the  past  year  has  probably  occurred  at  the  peak  of  interest  in  such  methods.   Many 
stores  have  distributed  funds  among  their  employees  during  the  past  few  years  for 
the  purpose  of  sharing  prosperity,  or  of  meeting  the  competition  of  other  lines  of 
business  for  employees,  and  such  distribution  has  not  become  permanently  a  part  of 
the  regular  system  of  compensation. 

During  the  holiday  season  just  passed  some  of  these  stores  failed  to  distrib- 
ute those  additional  funds  as  in  the  previous  two  years,  and  in  other  cases  the 
amount  distributed  was  substantially  smaller  than  that  of  the  previous  year.   Such 
funds  were  used  to  bridge  temporarily  the  gap  between  retail  store  wages  and  factory 
and  business  office  wages,  during  the  period  of  keenest  competition  for  workers. 

Retail  store  wages  cannot  normally  rise  and  fall  with  the  rapidity  of  indus- 
trial wages,  since  the  nature  of  the  business  does  not  permit  of  increases  and  de- 
creases in  the  number  of  workers  in  as  exact  ratio  to  sales  as  can  be  applied  in 
the  factory  in  ratio  to  production. 

In  a  time  of  readjustment  the  store  cannot  shut  down  or  run  on  part  time.   A 
relatively  large  proportion  of  employees  must  be  retained  in  the  periods  of  poorest 
business,  in  order  that  all  departments  may  be  operated,  merchandise  protected,  and 
a  trained  force  ready  for  increased  business.   During  the  period  of  rising  cost  of 
living  and  keen  competition  for  labor  the  wage  level  in  retail  stores  has  been 
substantially  raised,  but  bonus  payments  and  gifts,  less  permanent  than  wage  in- 
creases, have  often  been  depended  upon  to  meet  the  need  for  maximum  wages. 

DEFINITION  OF  COMMISSION  AND  BONUS 

The  terms  commission,  bonus,  and  profit  sharing  have  been  used  by  various 
stores  to  designate  almost  identical  systems.   Their  use  for  classification  or  de- 
scription of  the  various  methods  of  compensation  is  misleading  without  careful 
definition. 

The  Committee  for  the  Study  of  Wage  Problems  of  the  National  Retail  Dry  Goods 
Association  has  established,  for  the  purposes  of  its  reports,  the  following  defini- 
tions : 

Commission:  A  percentage  paid  to  individual  salespeople  on  their  total  sales. 


Bonus:   A  payment  in  addition  to  regular  wage,  for  services  exceeding  a  set 
quota  or  standard  in  quantity  or  quality.   (May  be  determined  as  a 
percentage  of  sales  above  quota  or  by  any  method  of  measurement. 
Applicable  to  either  selling  or  non-selling  forces.) 


(4) 


* 


These  definitions  allow  a  clear  division  of  various  types  of  commission  and 
bonus  systems,  "but  do  not  conform  wholly-  to  common  usage  in  that  they  do  not  recog- 
nize as  "bonus  any  distribution  for  service  not  measured  by  individual  performance, 
and  are  not  comprehensive  in  failing  to  recognize  as  bonus  payment  that  plan  of  a 
number  of  stores  of  distributing  funds  measured  by  group  performances. 

The  definition  of  the  term  bonus  as  given  above  is  therefore  used  in  this 
statement  as  measured  individual  bonus,  and  the  terms  me^asured  group  bonus  and 
bonus  without  qualification  are  used  in  the  following  senses: 

« 

Measured  group  bonus:  Payment  in  addition  to  regular  wage,  through  distribu- 
tion in  accordance  with  wage  or  responsibility,  for  services  by  em- 
ployees as  a  group  exceeding  a  set  quota  or  standard  in  quantity  or 
quality. 

Bonus:  Payment  in  addition  to  regular  wage,  through  distribution  in  accord- 
ance with  wage,  responsibility  or  length  of  service,  to  all  employees 
or  to  groups  of  employees,  in  recognition  of  improved  service  or  team- 
play,  but  not  measured  by  quota  or  standard  applied  to  the  work  of 
individuals  or  groups. 

Other  terms  used,  and  the  sense  of  their  usage,  are: 

Profit  sharing:  "An  agreement  freely  entered  into,  by  which  the  employees 
receive  a  share,  fixed  in  advance,  of  the  profits." 


Adjusted  wage :  Wages  adjusted  at  frequent  intervals  in  accordance  with  the 
quality  and  quantity  of  service  by  the  individual  employee. 

COMMISSION  SYSTEMS 
The  essential  features  of  commission  systems  are: 

(1)  Commission  is  paid  only  to  salespeople  or  executives  of  selling  depart- 
ments. 

(2)  Commission  is  paid  in  addition  to  regular  wage  or  drawing  account, 
usually,  wage  is  paid  weekly  and  commission  monthly. 

(3)  Commission  is  paid  on  all  sales,  i.e.,  there  is  no  sales  quota.   Com- 
mission, however,  is  paid  upon  net  sales,  not  gross  sales. 


(4)  Rates  of  commission  range  from  1/2^^  to  1  l/S^^.   In  some  cases  -yie  same 
rate  is  paid  in  all  departments;  in  other  cases,  higher  rates  are  paid  in  depart- 
ments where  volume  of  sales  is  relatively  smaller  because  of  the  nature  of  the 
merchandise--thus,  the  lowest  rate  of  commission  in  furs,  the  highest  rate  in 
notions  and  smallwares. 


(5) 

COMMISSIONS--PRO  AND  CON 

The  principal  advantage  of  the  commission  system  is  that  all  salespeople  earn 
in  addition  to  the  regular  wage--the  incentive  applies  to  all.   The  principal  dis- 
advantage is  that  the  compensation  of  the  poorer  salespeople  may  "be  larger  in 
percentage  to  sales  than  that  of  the  "better  salespeople,  unless  the  regular  wage  is 
constantly  adjusted. 

Some  stores  have  comhined  the  commission  and  individual  bonus  systems,  paying 
commission  on  all  sales,  and  additional  commission  on  sales  ahove  the  given  quota, 
in  order  to  secure  the  advantage  of  having  all  salespeople  earn  commission,  and  at 
the  same  time  overcome  largely  the  possihility  of  salespeople  "below  the  average 
earning  in  greater  proportion  to  sales  than  those  ahove  the  average. 

EXAMPLES 

Among  the  stores  using  the  commission  system  are  the  following: 
William  Pilene's  Sons  Co.,  Boston.   Commission  on  all  sales,  at  rates  ranging 
from  1/2  to  1  1/2^^,  according  to  the  nature  of  the  departments. 

J.  L.  Hudson  Co.,  Detroit.   Commission  of  1/2$^  on  net  sales  throughout  the 
year  with  the  exception  of  December,  when  commission  of  1^^  on  net  sales  is  paid. 

B.  P.  Dewees,  Philadelphia.   Salesperson  working  full  time  receives  1^; 
salesperson  working  on  contingent  time--i.e.,  11  a.m.  to  5  p.m. --receives  3/4$^. 

Hager  &  Bro.,  Lancaster,  Pa.   Commission  of  1/2^^  and  1^^,  according  to  the 
nature  of  the  departments.   In  addition  this  concern  has  a  department  bonus  for 
sales  workers  and  a  bonus  for  non-selling  workers  which  are  described  in  other 
sections  of  this  report. 

Patton-Anderson,  Inc.,  Minneapolis.   Commission  of  1^^  on  net  sales. 

Christman  Dry  Goods  Co.,  Joplin,  Mo.   Commission  usually  1^^;  in  such  depart- 
ments as  furniture,  rugs,  men's  clothing,  women's  suits,  cloaks  and  dresses,  3/45^. 

Wm.  Hengerer  Co.,  Buffalo.   Commission  of  1/2^,  with  the  exception  of  two 
store-wide  sales,  when  commission  is  1^^  on  sales  and  3^  above  a  certain  quota  based 
upon  salaries. 

H.  C.  Capwell  Co.,  Oakland,  Cal.   Commission  of  Ifo,       (In  hairdressing  de- 
partment there  is  a  commission  of  5$^  on  hair  sales  and  2%   on  labor. ) 

SEASONAL  COMMISSIONS 


Some  stores  in  which  the  commission  system  is  not  used  throughout  the  year 
find  it  advantageous  for  certain  periods,  generally  during  the  Christmas  selling 


(6) 

season  or  for  special  sales  events.   Such  commissions,  paid  upon  all  sales,  usually 
are  in  addition  to  payments  made  under  an  individual  "bonus  system.   For  example: 

The  Dayton  Company,  Minneapolis.   Prom  NovemlDer  17  to  Decemher  24,  1919,  com- 
mission of  li   on  net  sales  was  paid  all  salespeople.   The  rate  of  commission  was 
increased  or  decreased  in  certain  departments  to  equalize  the  earning  opportunity. 

Jordan  Marsh  Co.,  Boston.   Commission  of  1/2^  is  paid  on  all  sales  from 
November  1  to  Christmas. 

Joske  Bros.  Co.,  San  Antonio.  For  three  weeks  prior  to  Christmas,  1919,  com- 
mission of  2<  was  paid  on  all  sales,  except  in  lace,  emhroidery  and  notions  depart- 
ments, where  the  commission  was  3^^. 

MEASURED  INDIVIDUAL  BONUS --SALESPEOPLE 

The  individual  honus  for  salespeople,  frequently  referred  to  as  the  quota 
system,  is  the  most  complex  of  the  compensation  systems  in  common  use,  yet  has  been 
adopted  in  some  form  by  more  stores  than  any  other  system.   It  has  as  many  varia- 
tions as  there  are  stores  using  it,  but  in  a  large  majority  of  cases  the  essential 
features  are  as  follows: 

(1)  Selling  expense  percentage  is  established  for  the  department,  from  ex- 
perience of  the  preceding  year  or  the  same  period  of  the  preceding  year,  as  the 
proportion  of  total  salaries  to  total  sales  of  the  department. 

(2)  Selling  quota  for  each  salesperson  is  established  .on  the  basis  of  regular 
wage  and  selling  expense  percentage. 

(3)  Bonus  at  an  established  rate  (usually  about  one-half  of  the  selling  ex- 
pense per  cent,  and  often  more  than  one-half  of  that  per  cent)  is  paid  on  all  sales 
in  excess  of  the  quota. 

(4)  The  bonus  period  ranges  from  one  to  six  months,  and  deductions  are  made 
from  sales  above  the  quota  for  sales  below  the  quota  during  that  period  in  figuring 
bonus . 

THE  BONUS  SYSTEM- -PRO  AND  CON 

The  principal  advantage  of  such  a  bonus  system  is  .that  it  establishes  a  stand- 
ard task  for  each  employee  which  must  be  performed  before  the  regular  wage  is  fully 
earned,  with  a  reward  for  those  who  exceed  the  standard  task.   The  principal  dis- 
advantage is  that  salespeople  who  cannot  earn  a  bonus  with  any  degree  of  regularity 
lose  the  incentive  to  do  their  best.   This  disadvantage  is  frequently  due  to  the 
difficulty  in  figuring  quotas  accurately  and  fairly. 

There  are  many  systems  of  establishing  quotas,  and  widely  varying  rates  of 
bonus  on  sales  above  the  quota.   There  is  no  standard  system.   A  typical  system, 


(7) 

however,  is  descri"bed  in  the  following  quotation  from  the  statement  to  their  em- 
ployees "by 


Ah 


raham  &  Straus,  Inc. ,  Brooklyn.   "This  is  the  Abraham  &  Straus  method  of 


arriving  at  your  quota: 

"Pirst:   The  total  net  sales  for  your  department  for  each  month  of  the  year 
for  the  past  five  years  is  noted  hy  our  Accountants. 

"Second:   The  total  salaries  in  your  department  for  the  same  length  of  time 
is  noted  hy  our  Accountants. 

"Third:   The  total  salaries  for  each  month  for  the  five  years  is  divided  hy 
the  total  sales  for  each  month  for  the  five  years.   The  resulting  number  is  the 
average  selling  expense  in  your  department  for  each  month. 

"Take  an  example  to  make  it  clear: 

"Suppose  that  your  department  has  done  |10,000.00  business  for  each  June  for 
the  last  preceding  five  years.   Adding,  the  total  amount  of  business  for  the  five 
Junes  is  $50,000.00. 

"Suppose  that  the  salaries  in  your  department  have  been,  each  June  for  the 
last  five  years,  $550.00.   Adding,  the  total  amount  of  salaries  is  $2,750.00.. 

"Divide  the  $2,750.00  (total  salaries  for  five  Junes)  by  $50,000.00  (total 
sales  for  five  Junes).  The  answer  is  .05  1/2^^,  which  means  that  the  selling  ex- 
pense in  your  department  is  five  and  a  half  per  cent. 

"Now  suppose  that  your  salary  is  $11.00  per  week.   Eleven  dollars  is  5  1/2^ 
of  $200.00.   Therefore,  $200.00  is  your  quota  and  you  will  have  to  sell  it  each 
week  before  you  have  actually  earned  your  salary  of  $11.00.   Whatever  you  sell  over 
and  above  $200.00  would  be  over  and  above  what  the  $11.00  pays  you  for.   On  any 
amount  you  sell  above  $200.00  a  week,  therefore,  you  are  entitled  to  a  bonus  com- 
mission of  25^--and  with  the  Abraham  &  Straus  bonus  commission  system,  you  get  it. 

"Your  quota,  you  see,  has  nothing  to  do  with  the  commission  that  you  or  any 
other  clerk  in  your  department  has  earned  the  month  before. 


"In  justice,  your  quota  must  be  changed  almost  every  month — raised  in  the  busy 
season,  lowered  in  the  dull  season.   At  the  beginning  of  each  month  you  will  be 
notified--in  writing--of  the  amount  of  your  quota  for  that  month;  that  is,  the 
amount  you  must  sell  before  you  have  earned  your  salary  and  before  you  are  entitled 
to  any  bonus. " 


(8) 

Among  the  various  individual  "bonus  plans  for  salespeople  in  operation  are  the 
following: 

LaSalle  &  Koch  Co.,  Toledo.   Quotas  and  honus  are  figured  according  to  the 
following  plan: 


"The  rates  of  commission  necessarily  varied  in  the  several  departments,  for  it 
is  ohvious  that  the  same  rate  would  not  hold  for  two  departments  so  radically  dif- 
ferent, as,  for  instance,  notions  and  furniture.   These  rates  were  hased  on  an  ac- 
cumulation of  information:  the  cost  of  selling  in  this  store  for  the  three  pre- 
vious years  and  the  cost  of  selling  in  several  other  organizations,  modified  to  fit 
the  particular  conditions  existing  in  the  departments,  such  as  location,  size  and 
light.   These  are  the  rates  arrived  at;  they  are  not  as  yet  perfected,  for  the  rate 
should  be  such  that  some  person  in  each  department  is  capahle  of  earning  commission 
on  that  hasis.   And,  as  a  matter  of  fact,  there  are  two  or  three  departments  in 
which  no  one  earns.   But,  inasmuch  as  these  rates  would  have  to  "be  modified  for  any 
other  organization  in  any  case,  it  is  a  matter  which  need  not  "be  discussed  at 
length.   The  first  column  indicates  the  rate  on  which  the  daily  quotas  are  hased, 
the  rate  on  which  drawing  accounts  are  reckoned.   The  second  column  shows  the  per 
cent  of  commission  paid  on  sales  in  excess  of  the  stipulated  quota. 

Art H  and  •  5^ 

Boys  •  I^urnishings ^i  and  5^ 

Buttons "^i  and  6i 

Carpets ,  Rugs ,  Linoleums 3-|-^  and  3^^ 

China,  House  Furnishings 5^^  and  5^ 

Coats  and  Suits Hi  and  3^^ 

Colored  Dress  Goods 65^  and  5^ 

Corsets H  and  4^ 

Curtains 4^^  and  4^^ 

Dresses 3^^  and  3i^ 

Furniture H  and  2^ 

Furs H  and  2% 

Gloves H  and  4^ 

Handkerchiefs H  and  5^ 

Hosiery H  and  3^ 

Infants  •  Wear H  and  5^ 

Jewelry ^i  and  bi 

Knit  Underwear H  and  4^ 

Leather  Goods ,  Umhrellas 65^  and  5^ 

Linens H  and  4^ 

Men's  Clothing.; 5<  and  bi 

Men's  Furnishings bi  and  5^ 

Muslin  Underwear H  and  5< 

Millinery H  and  bi 

Neckwear H  and  bi 

Notions "li  and  6^ 


(9) 


Petticoats 5^  and  5^ 

RilD"bons 6^  and   5^ 

Shoes 6^  and  6^ 

Silks 4^  and  3^ 

Silverware b<^  and  5^ 

Toilets b^  and  A^ 

Trimmings 55^  and  4^^ 

Waists b^  and  A^ 

Wash  Goods ,  Domestics 65^  and  A^ 

The  percentage  in  the  first  column  was  made  larger  in  order  to  make  it  easier  to 
reach  the  daily  quota  and  thus  earn  extra  money  on  commissions.   In  this  way  people 
are  encouraged.   It  will  he  noticed  that  in  this  store  AO^   of  the  departments  have 
the  same  rate  on  both  quota  and  excess  sales,  and  that  these  departments  are  largely 
departments  carrying  staple  merchandise,  or  merchandise  without  great  style  varia- 
tions; while  the  other  60<^   which  have  a  lesser  per  cent  on  excess  sales  are  largely 
departments  which  deal  in  style  merchandise  or  perishable  merchandise.   The  closer 
the  two  per  cents  are,  the  better  and  more  fairly  the  system  works  out." 

R.  H.  Macy  Co., New  York.   Combined  commission  and  individual  bonus  plan. 
Commission  of  1/2^  on  all  sales  up  to  quota;  2<^   on  all  sales  above  quota. 

Henderson-Hoyt  Co.,  Oshkosh,  Wis.   Quota  based  on  percentages  ranging  from 
4^  in  ready-to-wear  to  12^^  in  notions  and  books,  with  3^  bonus  for  all  sales  above 
quota. 

Shepard  Stores,  Boston.   Average  cost  of  selling  for  each  month  in  each  de- 
partment is  figured  for  past  two  or  three  years.   The  quota  each  salesperson  should 
sell  per  day  is  figured  by  using  this  per  cent  and  the  individual  salary.   A  slip  is 
given  to  each  salesperson  at  the  first  of  each  month  telling  what  their  sales  must 
average  each  day  in  order  to  earn  a  bonus  at  the  end  of  each  month.   On  all  sales 
above  such  amount  for  the  month,  they  are  paid  2^, 


Other  stores  using  such  individual  bonus  systems  for  salespeople,  with  similar 
systems  except  for  variations  in  quotas  and  rates  of  bonus  for  sales  above  quotas, 
are: 

Jordan  Marsh  Co., .Boston. 

The  Wanamaker  Stores,  Philadelphia  and  New  York. 

The  Emporium,  San  Prancisco. 

Broadway  Department  Store,  Los  Angeles. 

Killian  Co.,  Cedar  Rapids,  Iowa. 

Stix,  Baer  &  Puller  Dry  Goods  Co.,  St.  Louis. 

Hale  Bros.,  Sacramento,  California. 

Halle  Bros.  Co.,  Cleveland. 


MEASURED  INDIVIDUAL  BONUS- -BUYERS 

A  number  of  stores  have  applied  individual  bonus  plans  in  the  compensation  of 
executives  of  selling  departments,  generally  buyers  and  assistant  buyers. 


• 


(10) 

In  such  systems,  however,  the  honus  is  usually  a  percentage  of  the  sales  of 
the  department  over  sales  of  the  same  period  of  the  preceding  year,  or  of  sales 
over  the  quota  assigned  to  the  department. 

Some  instances  of  such  individual  honus  payments  are: 

Ahraham  &  Straus,  Brooklyn.   Assistant  huyers  receive  1/3^  on  the  increase  of 
the  year's  sales  in  their  department  over  the  preceding  year.   Buyers  usually  re- 
ceive a  special  commission  on  increased  sales. 

William  Eilene ' s  Sons  Company,  Boston,  have  a  plan  hased  on  the  net  sales  of 
the  department  and  the  per  cent  of  gross  profit  on  the  sales.   Payments  to  an  in- 
dividual working  in  more  than  one  department  are  made  only  if  the  minimum  sales  and 
gross  profit  percentages  for  the  group  of  their  departments  have  heen  exceeded. 

If  an  individual  working  under  the  above  management  is  transferred  during 
the  year  he  is  paid  the  proportionate  part  of  the  year's  accomplishment  based  on 
the  time  employed  in  each  department  or  group  of  departments.   Payment  is  made  to 
individuals  only  if  they  have  been  employed  for  the  full  fiscal  year. 

Any  payments  which  may  be  due  under  this  plan  are  to  be  subject  to  the  con- 
dition that  after  the  payment  of  such  sums  as  are  called  for  under  this  plan  or 
any  other  offering  of  extra  remuneration  incentive  which  may  be  approved  by  the 
management,  and  after  the  deduction  from  Total  Store  Profit  all  expenses,  taxes, 
merchandise  depreciation,  dividends,  bonus  and  any  distribution  in  the  form  of 
Profit  Sharing,  there  shall  be  left  to  the  business  a  minimum  per  cent  of  net  profit 
to  sales  to  be  set  by  the  management. 

Joske  Bros.  Co.,  San  Antonio.   Buyers  are  paid  a  bonus  of  2i   on  all  increases 
in  sales  over  sales  of  the  preceding  year. 

MEASURED  INDIVIDUAL  BONUS --NON- SELLING  EMPLOYEES 

Commission  and  individual  bonus  systems  have  been  applied  to  selling  em- 
ployees in  many  stores,  but  few  stores  have  devised  a  satisfactory  system  of  ad- 
ditional payment  for  non-selling  employees  on  either  a  piece-work  basis  or  that  of 
performance  of  more  than  a  standard  task. 

The  problem  of  rewarding  efficient  work  by  non-selling  employees  has  usually 
been  met  by  the  distribution  of  a  fund  among  such  employees,  either  in  proportion 
to  salary  or  on  the  basis  of  length  of  service.  Usually  the  amount  of  the  fund  so 
distributed  is  arbitrarily  fixed,  but  several  stores  make  it  a  practice  to  dis- 
tribute among  non-selling  employees  a  fund  equal  to  the  total  commissions  or  bonus 
paid  to  selling  employees. 

Methods  of  estimating  and  paying  additional  compensation  for  non-selling 
employees,  based  upon  service  above  a  given  standard  of  quality  or  quantity,  have 
been  developed  for  some  departments  by  several  stores.   Among  them  are  the  follow- 
ing: 

Hale  Bros.,  Sacramento.   Delivery  drivers  receive  a  bonus  of  $5.00  a  month, 


9 


(11) 

provided  they  score  100^  on  inspection  of  their  automohiles.   There  is  a  50c  de- 
duction for  each  criticism,  such  as  a  dirty  engine,  insufficient  oil,  etc. 

NON- SELLING  BONUS 

A  large  Cleveland  store  is  applying  the  following  individual  honus  methods 
for  non-selling  employees: 

Wagon  Boys*  Bonus:   Wagon  hoys  may  earn  a  honus  of  |2.00  per  week  hy  regular 
and  prompt  attendance  every  day.   If  the  hoy  is  ahsent  during  the  week  without  a 
reasonahle  excuse,  he  loses  his  entire  honus.   If  he  has  heen  at  work  every  day,  he 
loses  25c  for  each  time  he  is  late. 

This  plan  has  "been  successful  in  securing  hetter  and  prompt  attendance. 

Bookkeepers'  System  of  Production  Payment:   Billers  are  credited  with  Ic  for 
each  check  hilled.   This  includes  forwarding  on  trial  halance  and  halancing  each 
day's  work,  hut  does  not  include  making  the  monthly  halance  on  the  hiller's  work. 

Deductions.   A  deduction  of  25c  is  made  for  each  error  in  hilling  and  a  de- 
duct iorToFToThecks  is  made  for  each  mistake  in  heading  they  pass.   The  hills  are 
headed  hy  girls  who  are  not  hillers. 

The  period  figured  in  computing  the  amount  due  each  hiller  is  from  the  fourth 
husiness  day  of  one  month  to  the  third  husiness  day  of  the  next,  inclusive.   At  the 
end  of  this  period  she  receives  the  difference  hetween  the  amount  paid  her  on  her 
weekly  drawing  account  and  the  amount  due  her  at  Ic  per  check,  minus  deductions. 

The  hookkeeping  is  done  on  Elliott-I'isher  machines. 

Elevator  Operators'  Bonus  System:  The  elevator  director,  assisted  hy  a  corn- 
mi  ttee^oFfTvTpeoplTTeTecterihr^^  store,  together  with  the  recommendation 
from  her  assistants,  grades  each  operator  on  the  following  points: 

Punctuality ^^ 

Courtesy  and  Conduct ^^ 

Personal  Appearance ^^ 

Calling  Floors ^^ 

Making  Stops • ^ 

100 


Each  operator  making  a  monthly  average  of  95  or  higher  receives  a  honus  of 
$5.00.   By  the  use  of  a  honus  we  have  ohtained  gratifying  results  in  the  qualities 
listed  ahove. 

Production  Payment  for  Sorting  Sales  Checks  in  the  Auditing  Department:   Sort- 
ing sales  checks  consists  of  the  following  elements. 

1.  Collecting  charge  sales  checks  throughout  the  store. 


(12) 

2.  Sorting  checks  into  iDins  according  to  ledger,  sorting  out  all  employees' 
checks  and  others  not  handled  in  the  regular  ledger. 

3.  Auditing  checks  which  includes  verifying  extensions  and  additions,  making 
douhtful  checks  and  writing  clear. 

4.  Sorting  checks  into  strict  alphabetical  order. 

5.  Running  off  an  adding  machine  tape  for  each  ledger. 

Sorters  are  credited  3/4c  for  each  check  they  complete,  and  10  checks  are  de- 
ducted for  every  error  made.   At  the  end  of  the  week  the  sorter  receives  her  total 
earnings.   No  drawing  account  is  given  to  sorters.   The  work  is  done  "by  school  girls 
"between  4.00  p.m.  and  8.00  p.m. 

Delivery  Credit  Authorization  Production  Payments:   Authorizations  are  made 
from  a  Rand  Visible  Index. 

Delivery  authorizers  are  paid  l/2c  for  each  authorization.  A  deduction  of  25^ 
is  made  for  passing  C.  0.  D.'s,  had  accounts  or  no  accounts.  A  deduction  of  12  l/2c 
is  made  for  passing  checks  with  any  other  kind  of  a  mistake  on  it,  as  wrong  address, 
wrong  initials,  or  incorrect  spelling  of  name. 

At  the  end  of  the  month  the  authorizers  are  paid  the  difference  between  the 
amount  paid  them  on  their  drawing  accounts  and  the  amount  due  them  at  l/2c  per  au- 
thorization loss  deductions. 

Audit  Department  Tabulating  Card  Punchers  Production  Payments:   A  tabulating 
card  is  punched  for  each  sale  made. 

Punchers  are  paid  15c  per  100  checks  punched,  a  deduction  of  10  checks  being 
made  for  each  error.   They  are  given  a  drawing  account,  and  all  they  make  in  excess 
of  this  is  paid  them  weekly. 

Audit  Department  Sales  Checkers'  Bonus:   Each  tabulating  card  is  checked 
against  a  tally  to  see  that  all  details  are  correct. 

Checkers  receive  a  bonus  of  |10.00  if  no  errors  have  been  made  for  a  period 
of  one  month.   A  deduction  of  2<  of  this  bonus  is  made  for  each  error.   If  no  errors 
are  made  for  three  months,  an  additional  bonus  of  $5.00  is  paid. 

H.  C.  Capwell  Co.,  Oakland,  Cal.   Drivers  are  paid  a  bonus  for  tire  mileage, 
being  paid  one-half  the  guaranteed  cost  per  mile  for  each  mile  run  over  the 
guarantee. 

MEASURED  INDIVIDUAL  BONUS- -LENGTH  OE  SERVICE 

Payments  for  length  of  service  may  be  classified  as  individual  bonus.   Such 
payments  are  made  by  a  number  of  stores  as  a  reward  for  the  ".sticking  qualities" 


1 


(13) 

of  employees,  and  in  some  cases  are  accompanied  hy   additional  vacation  periods  with 
pay  for  employees  of  25  yaars  or  more. 

Among  the  stores  making  such  payments  are: 

Davidson  Bros.  Co.,  Sioux  City,  Iowa.   At  Christmas,  1919,  $25.00  was  paid 
each  employee  who  had  TDeen  with  the  store  five  years;  |50.00  for  service  of  ten 
years;  and  $100.00  for  service  of  twenty  years. 

Best  &  Co.,  New  York.   Payments  to  non-selling  employees  were  adopted  in  1919 
on  the  following  hasis: 

1.  To  the  non-selling  employees  receiving  less  than  $1,600  salary  a  year,  and 
who  shall  have  completed  one  year  of  service  on  or  before  Dec.  31,  1919--55^  of 
annual  salary. 

2.  To  those  completing  2  years  of  service  —  6<^   of  annual  salary. 

3.  To  those  completing  3  years  of  service--?^^  of  annual  salary. 

4.  To  those  completing  4,  5,  6,  7,  or  8  years  of  service--95^  of  annual  salary. 

5.  To  those  completing  9,  10,  11,  12,  13  or  14  years  of  service--105^  of  annual 
salary. 

Payments  to  he  made  annually  on  the  seventh  "business  day  "before  Christmas. 

Lord  &  Taylor,  New  York.   In  1919,  the  following  "bonus  payments,  hased  upon 
length  of  service,  were  distributed: 

Those  in  store  continuously  for: 

10  years  or  more,  to  Jan.  1,  1920 $30.00 

5  years  and  less  than  10  years,  to  Jan.  1,  1920 25.00 

3  years  ,and  less  than  5  years,  to  Jan.  1,  1920 •  20.00 

2  years  and  less  than  3  years,  to  Jan.  1,  1920 15.00 

1  year  and  less  than  2  years,  to  Jan.  1,  1920 12.50 

6  months  and  less  than  1  year,  to  Jan.  1,  1920 10.00 

Less  than  6  months,  to  Jan.  1,  1920 • 8.50 

MEASURED  GROUP  BONUS 

A  number  of  stores  have  found  it  desirable  to  establish  systems  of  bonus 
payments  for  departments  or  groups  of  employees,  both  selling  and  non-selling, 
where  the  department  has  performed  a  task  above  the  given  standard  in  quality  or 
quantity. 

Instances  of  this  type  of  bonus  payment  are: 

Hager  &  Bro.,  Lancaster,  Pa.   Percentage  of  increase  in  sales  by  depart- 


1 

• 


(14) 

merits,  ranging  from  1  1/2^  to  2  l/2<  according  to  the  nature  of  the  department, 
divided  among  the  employees  of  the  department  in  proportion  to  salary.   This  is  in 
addition  to  commissions  paid  individual  salespeople  upon  all  sales. 

Hale  Bros.,  Sacramento.  A  honus  fund  equal  to  $5.00  per  month  per  person  is 
established  for  the  credit  office.  Every  error  in  hilling,  posting,  etc.,  made  by 
anyone  in  the  department  is  charged  against  this  fund,  and  whatever  is  left  in  the 
fund  at  the  end  of  the  month  is  divided  pro  rata. 

James  McCreery  &  Co . ,  ITew  York.   An  "employees'  economy  dividend"  is  paid  to 
the  store  workers  representing  one-half  of  the  savings  in  operating  expense  for 
the  current  month  over  the  average  of  the  costs  of  the  same  months  for  the  five 
preceding  years.   This  distribution  is  on  the  theory  that  reduced  cost  of  operations 
resulting  mostly  from  an  increase  of  sales,  is  accomplished  by  diligence,  courtesy, 
carefulness  in  saving,  accuracy  and  the  avoidance  of  waste.   The  dividend  is 
figured  by  securing  the  percentage  of  total  expense  for  the  given  month  for  five 
preceding  years  to  the  total  sales  of  the  same  month  for  the  same  period.   If  the 
percentage  of  operating  cost  to  sales  is  lower  than  the  average,  this  saving  is  dis- 
tributed.  This  company  originally  based  its  estimates  on  savings  over  the  preceding 
year,  but  has  changed  to  the  average  of  the  five  preceding  years  as  a  fairer  es- 
timate, 

Jordan  Marsh  Co.,  Boston.   A  bonus  distribution  with  features  of  both  group 
bonus  and  profit  sharing  plans  is  made.   Each  employee  holds  a  given  number  of 
shares  in  the  distribution  ranging  from  3  to  16,  according  to  the  responsibility  of 
the  position.   Por  example,  a  salesperson  holds  9  shares,  an  assistant  buyer  12 
shares,  a  buyer  16  shares.   When  the  total  fund  to  be  distributed  is  determined,  it 
is  divided  by  the  toal  number  of  shares  outstanding,  and  the  amount  for  each  em- 
ployee thus  figured.   The  fund  divided  among  selling  employees  is  a  fixed  per- 
centage of  the  increase  in  sales  over  the  preceding  year.   The  fund  for  non-selling 
employees  is  a  fixed  percentage  of  the  increase  in  sales  plus  a  fixed  percentage  of 
the  increase  in  net  profits,  since  the  work  of  non-selling  employees,  through  cut- 
ting down  or  holding  down  expense,  has  a  direct  effect  upon  net  profits. 

Chas.  Korrick  &  Bro.,  Phoenix,  Ariz.   Each  department  showing  an  increase  of 
business  for  a  month  of  25^  or  more  over  the  corresponding  month  of  the  preceding 
year  receives  a  bonus  of  2  1/2^,  divided  among  the  employees  of  the  department  on 
the  basis  of  their  percentage  cost— wage  in  proportion  to  sales  for  that  month. 

PROPIT  SHARING 

Profit  sharing  in  its  technical  sense  (see  definition  page  four)  is  not 
practised  by  any  of  the  stores  covered  in  this  survey. 

STOCK  PARTICIPATION  BY  EMPLOYEES 

Some  of  the  stores  allow  employees  to  purchase  company  stock.   Among  these 
stores  the  following  are  typical: 

Montgomery  Ward  &  Co.,  Chicago.   Employees  have  been  permitted  to  purchase 


(15) 


% 

* 


stock  at  a  price  consideralDly  under  the  market  value,  and  a  number  have  taken  ad- 
vantage of  this  opportunity. 

Sanger  Bros.,  Dallas.   When  the  corporation  was  organized  in  1919,  they  of- 
fered $1,000,000.00  of  common  stock  to  employees  at  50^  of  its  value,  with  the  un- 
derstanding that  this  $1,000,000.00  worth  of  stock  must  receive  45  dividends  hefore 
the  remainder  of  $8,500,000.00  common  stock  received  any  dividend.   This  stock  was 
fully  suhscrihed  for  hy  employees. 

The  Marston  Co.,  San  Diego,  invites  the  purchase  of  company  stock  "by  all  em- 
ployees who  have  heen  with  the  firm  more  than  three  years.   The  only  restriction 
on  such  holdings  is  an  option  which  gives  opportunity  of  repurchase  to  other  em- 
ployees if  the  holder  leaves.   Ahout  one  employee  in  eight  holds  stock. 

Miller  &  Paine,  Lincoln,  Neh.   Much  of  the  stock  is  held  by  employees,  ranging 
from  large  amounts  down  to  one  share. 

Rothschild  Bros. ,  Ithaca,  N.  Y.   Have  sold  some  stock  to  their  employees. 

BONUS  PAYMENTS 

With  the  possible  exception  of  commission  and  bonus  payments  to  salepeople, 
the  majority  of  payments  in  addition  to  regular  wages  by  retail  stores  have 
been  in  the  form  of  bonus  funds  among  all  employees  in  proportion  to  salary  or  to 
length  of  service. 

These  are  generally  distributed  during  the  holiday  season. 

Among  the  stores  which  have  made  such  distribution  are  the  following: 

Eranklin  Simon  «Sc  Co.,  New  York.   In  1919,  selling  employees,  except  in  men's 
shops,  and  non-selling  employees,  were  given  ^i   of  salary  for  six  months  preceding 
August  1;  a  similar  5$^  payment  was  made  for  the  five  months  period  from  Aug.  1  to 
Jan.  1,  and  selling  employees  also  shared  in  a  fund  of  5^  of  the  total  salaries  of 
the  employees  of  each  department,  distributed  in  the  ratio  of  the  sales  of  each  in- 
dividual to  the  total  sales.  ^ 

Louis  Traxler  Co.,  Dayton,  Ohio.   All  employees  holding  non-executive  and 
non-selling  positions  have  received  5^^  of  their  December  salary,  and  all  employees 
in  the  selling  departments,  regardless  of  regular  commission,  received  1/2^  of 
their  December  sales  as  a  bonus. 

L.  Bamberger  &  Co.,  Newark.   The  following  distribution  was  made  at  Christmas, 

1920: 

Co-workers  employed  before  Jan.  1,  1920 $20.00 

It         •»    since  Jan.  1  and  before  July  1 15.00 

w         »»    on  July  1  and  before  Nov.  1 10.00 

«         "on  Nov.  1  and  before  Dec.  1 5.00 


(16) 

These  amounts  were  paid  to  the  selling  as  well  as  the  non-selling  force.   In 
order  to  receive  the  remeralD ranee,  it  was  necessary  to  have  perfect  attendance  from 
Nov.  29  to  Dec.  24.   It  did  not  apply  to  a  few  departments  where  special  arrange- 
ments as  to  employment  had  "been  made. 

Hager  &  Bro.,  Lancaster,  Pa.   A  "bonus  is  paid  semi-annually  to  non-selling 
workers,  including  workers  in  Office,  Advertising  Department,  Delivery  Department, 
Shipping  Room,  Porters,  Packers,  Wrapping  Department  and  Cash  Boys  and  Girls.   SuId- 
ject  to  efficiency  shown  during  term;  to  he  determined  hy  recommendation  of: 

1.  Superintendent  and  general  assistants. 

2.  Heads  of  respective  departments. 


To  those  employed  over  one  year,  hut  less  than  three  years--45^  of  salary  for 


term. 


To  those  employed  over  three  jrears ,  "but  less  than  five  years  —  6^  of  salary 
for  term. 


term. 


To  those  employed  over  five  years,  "but  less  than  ten  years  —  S^   of  salary  for 


To  those  employed  ten  years  and  over--105^  of  salary  for  term. 


/ 


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